Really?

Saudi Arabia trying to enlist other oil-producing countries to support a
provocative idea: if wealthy countries reduce their oil consumption to
combat global warming, they should pay compensation to oil producers.

The US pays farmers not to grow; why not pay oil producers not to drill?

IanOctober 13, 2009 at 11:07 pm

Foobarista, I doubt they blew much of it on booze, as it is illegal in SA.

MarioOctober 13, 2009 at 11:11 pm

If it were any other product, measures countries take that increase the price of an import would rightly be seen as a tariff. From the Saudi perspective, any carbon control measure is virtually identical to a subsidy to domestic energy producers (not to mention, well, the actual subsidies to domestic energy producers).

Of course, that line of argument only works if one completely ignores the externalities of different forms of energy (plus, the Saudis would have to convince the WTO that “energy” was the good, not oil specifically). There is a logic to the proposal, though.

PJOctober 13, 2009 at 11:21 pm

Why don’t they just offer to restrict supply instead?

MikeOctober 13, 2009 at 11:26 pm

Their wealth depends almost entirely on oil revenues. The rest of the world needs (or at least is better off with) their cooperation. So, they have a bargaining chip and a need. They either want compensation for reduced oil demand so they can maintain their wealth, or they want help diversifying their economies. If not, they’ll throw a tantrum and hold up progress. They have few other options.

JPOctober 13, 2009 at 11:30 pm

And I thought chutzpah was a Jew thing!

GlorkOctober 13, 2009 at 11:33 pm

If we agree to this, we’re idiots. Or, I should say, even worse idiots. The Saudis have been spending billions of their “free wealth” funding radical mosques and madrassas all over the world. If times get tough they should be forced to cut back on those activities.

I’d like to hear the methodology that Saudi Arabia proposes to use in order to calculate “fair” compensation. Whatever formula they use, it should be possible to back into an implied “fair” price for crude oil. That could lead to some very interesting questions about Saudi Arabia’s policies regarding oil prices in the past.

DuncanOctober 14, 2009 at 12:57 am

They certainly do blow it on booze; a number of floors at the Nile Hilton in Cairo are permanently on reserve for various members of the Saudi royal family who come to party for weeks on end with 10-liter bottles of Cristal and their entourage of Russian hookers.

Tracy WOctober 14, 2009 at 3:34 am

Glork, if you buy your oil from the Mid-West farmer, this means that the Arab oilman has a lot of oil they haven’t sold, which they will turn around and sell to someone else.
You think companies in countries like China and India are going to refrain from buying from the Arab oilman? You think that if everyone prefers buying oil from the mid-Western farmer no one’s going to fake the documentation?

The logic here is that oil is fungible, it’s not about the idea that they’ll spend the money on different things.

The sad thing is that if it were Midwestern farmers making this argument rather than Saudis, it would be taken seriously. We don’t take the argument seriously because it’s being made by Saudis. We shouldn’t take the argument seriously because it’s bad economics.

Wade NicholsOctober 14, 2009 at 10:03 am

Isn’t this just another way of bringing back the “jizya”?

mark October 14, 2009 at 1:34 pm

Heads we pay them for oil, tails we pay them for no oil? Fair enough, but they should compensate us for all the American cars they haven’t bought, all the American books, films, cds they haven’t bought, all the American food and beverages they haven’t bought, all the American household products they haven’t bought, etc. etc. We have a lot more exports they aren’t buying from us than their one export.
The only thing they don’t have to pay for not having bought from us are fighter aircraft they bought from us.

mulpOctober 14, 2009 at 2:07 pm

How can they complain about the carbon tax aka cap and trade; all they need to do is raise their prices and pass the costs of the taxes onto consumers.

After all, every tax on producers and businesses always get passed on to consumers and are never paid by the corporation and resource owners.

Or so we are taught repeatedly in economics classes and ads paid for by conservatives condemning cap and trade. Clearly the Saudis have been studying the wrong economics textbooks.

DBOctober 14, 2009 at 5:24 pm

“No, but at least they’ll be the ones stuck dealing with all the political consequences that that entails. Let them pay the price for propping up Saudi Arabia.”

This is what is happening essentially. The problems of corrupt oil producing countries are global problems that effect affect Americans, Chinese, Europeans and everyone else. The US government is still deeply intertwined with Saudi Arabia, despite the fact that SA only provides 11% of our oil.